The executive branch estimate of total imports of farm machinery by the participating countries from the United States over the four years, 1948-49 to 1951-52 is $545 million. This is expressed in free-along-ship prices, which are about 10 percent higher than wholesale prices. Adjusting for this difference, exports to the participating countries in this volume would amount, on the average, to less than 10 percent of the expected output of farm machinery in the United States, as compared with an estimated 4 percent in 1947.

The United States will be able to export this volume of farm machinery to the participating countries, to continue exports to nonparticipating countries at the 1946 rate, and at the same time to retain substantially more machinery for domestic use each year than was available in 1946. Production of farm machinery in the United States since 1939 has been at a relatively high level, except in 1943, and United States farms are better equipped than ever before. However, many farmers have new machinery on order and have in many cases been waiting for delivery for considerable periods. The incentive to add new labor-saving devices is especially strong at this time because farm wage rates are at record levels. Farm income is also at a peak, and farmers have adequate resources to purchase new equipment. It may therefore be expected that the demand of American farmers for new machinery will remain high. Nevertheless, the expected volume of production appears to be adequate to meet this demand and to supply exports in the volume indicated.

Another important factor which has been taken into consideration in the preparation of the executive branch estimates is the need for special types of equipment by the participating countries in relation to production in this country. The tractor requirements of the participating countries, for example, are concentrated on large units, chiefly Diesel crawlers, production of which is small in the participating countries. Requirements of heavy tractors for the participating countries are large in relation to United States plant capacity and needs. The same may be true in the case of grain binders and threshers. If United States manufacturers make allowance for these requirements in their production plans, it is probable that output of these items could be increased, but such an expansion would require some time and shipments in the first year or two of the recovery program will probably fall short of the requirements of the participating countries. The needs might be met, however, in later years.

VI. CONCLUSIONS

Because of the shortage of farm labor, work animals and farm machinery, it is very important that the participating countries derive the maximum benefit from the machinery they obtain. It is therefore essential that machinery be distributed in such a way that it can be used nearly to capacity. Where farm operations are predominantly on a small scale and custom operation of equipment is not feasible, the participating countries will probably find it desirable to facilitate cooperative arrangements for the use of machinery. There will also be important advantages to be gained from measures to ensure that machines of a particular make are so distributed that the manufacturer will be able to develop a wellrounded organization for servicing, supply of spare parts, and the instruction of new users in operation and maintenance.

Care should also be taken to supply machinery which will, so far as possible, be adapted or adaptable to local needs, in order to ensure adequate utilization over the life of the equipment.

The farm tractors and machines should be integrated units. The present trend is toward mounted equipment such as plows, planters and cultivators, and such equipment fits only the tractor model for which it was designed. With pulled equipment and power take-off machines, tractors of different makes can be used. However, it is important for efficient operation that the machine size is in line with the power unit.

A solution of many of these problems can only be found as the program is carried out, but it will be important to keep these and similar considerations in mind while requirements are being established and plans made for mecting them. The CHAIRMAN. Now, there are one or two over-all questions that I would like to ask, and there are just two or three at the most.

Has the allocation to the ERP been based upon the needs of those 16 countries or on the basis of what we can advance without affecting our own economy?

Ambassador DOUGLAS. Mr. Chairman, first of all I would like to make the observation that these allocations are the result of study which has been going on for a period of 3 or 4 months. When, as, and if, the Administrator is appointed, he, of course, may make any necessary changes in these programs. These programs have been prepared on the basis of the best available information, but it will be the Administrator's responsibility to carry out the recovery program with judgment and flexibility and in accordance with changing

circumstances.

I understand, in answer to your specific question, that these estimates of the imports required by these various countries have been based upon a review of their needs, and then relating them to estimated supply availabilities, so that what you term "allocations" have not been made on the basis of their stated requirements.

The CHAIRMAN. With reference to the proposed allocations, would you be able to say whether the present emergency that exists in this country and the probability of its continuing into the future in any way changes the figures as previously suggested?

Ambassador DOUGLAS. Well, I should think, Mr. Chairman, that the final program would rest upon the facts as they then might be. The CHAIRMAN. The reason I asked that question is that this committee, when it conducted hearings in July last, received no such picture as has now developed with reference to shortages in our own country. In fact, the testimony of both Government witnesses and of industry would lead one to believe that no such condition as now exists could possibly arise, indicating that the best sources of information at that time were far off from what the situation was, and which has developed into the emergency that now exists.

Furthermore, the testimony that this committee took in December and also this present month disturbs us, because of the fact that it is now clearly indicated that it is not an immediate situation alone with which we have to deal, but that this condition will be projected into the future over a period of years. That has led this committee to sponsor a resolution which we hope will be given serious consideration, of appointing a joint committee of the Senate and the House to determine a national fuel policy. The only reason that we did that was because we recognized the seriousness of the condition not only from the standpoint of the present but also from the standpoint of the future.

Now, with that situation having developed unexpectedly if we are to base our judgment on the figures that were given to us in July last, it has occurred to me that it may be that those same figures may have helped to give a more optimistic report as to America's capabilities than the actual facts now seem to justify. It is for that reason that I am asking whether there is a review contemplated that will take into consideration these changed conditions which have become so apparent in these last few months.

Ambassador DOUGLAS. I cannot answer the question categorically, because I do not know; but I would presume that the matter would be under constant review.

The CHAIRMAN. How far have we through our agencies examined into the suggested needs of the 16 nations? Has that been a subject of study by our agencies of Government, and if so, by what agency?

Ambassador DOUGLAS. I am sorry. I did not hear the first part of the question.

The CHAIRMAN. I say, has the subject of need as expressed or requested by the 16 nations been a subject of investigation or study by any agency of our Government, and if so, by what agency?

Ambassdor DOUGLAS. Indeed it has. By all of the commodity committees, petroleum, food, steel, and all of the others, and as I have indicated, in respect of petroleum the requirements of the 16 participating countries were very substantially reduced.

The CHAIRMAN. From what agency of Government could this committee obtain information as to the extent of that study and their conclusions and the reasons therefor?

Ambassador DOUGLAS. The Departments of State, Interior, and Commerce.

The CHAIRMAN. Would these witnesses whom we have arranged to have appear before the committee today, who are accompanying you, Mr. Paul H. Nitze, Deputy Director of the Office of International Trade Policy of the Department of State, and Mr. Robert Eakens, Acting Chief of the Petroleum Division of the State Department, and Mr. Walter J. Levy, Petroleum Adviser for the Office of Intelligence Research, Department of State, be able to give us that information? Ambassador DOUGLAS. Yes; they are very well informed on the study made of the petroleum needs. While the Departments of Commerce and Interior have wide responsibilities in the field of petroleum, and have collaborated with the Department of State in the study of the oil needs of the 16 countries and western Germany, we have carried out the major responsibilities involved therein including the writing of the report.

The CHAIRMAN. We have had the witnesses here from the Department of Commerce; the outstanding witness of course was Mr. Ball who is the Director of the Oil and Gas Division of the Interior Department, and he has given us very important information, but I am not satisfied that the information which we have received from that source deals as completely with the European situation as the committee would like to have.

May I ask whether Mr. Eakens would be able to give the committee the information to which I have just referred?

Ambassador DOUGLAS. He would be able to give you information, Mr. Chairman, on the information which the staff of the State Department has, which has been derived from a number of sources including the Department of Commerce and the Department of the Interior. The CHAIRMAN. Well, these witnesses will be with us this afternoon, I assume.

Ambassador DOUGLAS. Yes; I would like to say this, that the present commodity study on petroleum represents a substantial revision, as the members of the committee realize, of the previous one. This revision takes account of the present world-wide supplyand-demand position in petroleum.

The CHAIRMAN. Is there any break-down that could be given to us that would show the amount of petroleum that the 16 nations received, we will say, in a period immediately preceding the war as compared to what they are asking at the present time and what is contemplated under the European recovery program?

Ambassador DOUGLAS. That is included in this commodity report covering petroleum.

The CHAIRMAN. It will give that information?
Ambassador DOUGLAS. Yes.

The CHAIRMAN. If there is no objection upon the part of the committee or anyone else, I will make a part of the record at this point the commodity report of the European recovery program, chapter G, dealing with petroleum. (Chapter G is as follows:)

COMMODITY REPORT: EUROPEAN RECOVERY PROGRAM
CHAPTER G. PETROLEUM

A. Introduction

I. SUMMARY AND CONCLUSIONS

Petroleum is essential for the recovery of Europe. The development of road, sea and air transportation, the expansion of inland shipping, the mechanization of agriculture, the provision of fuel for important segments of industry, and the operation of many public utilities and of oil-burning and Diesel locomotives depend on adequate petroleum supplies. Furthermore, lubricating oil is absolutely essential to Europe's economy, as it is to any industrialized economy. B. Requirements

The executive branch has studied the world-wide availability of crude oil and petroleum products, and the essential needs of the participating countries. In view of the general shortage of petroleum it was necessary to assume that less essential uses would continue to be restricted, and that the large-scale coal to oil conversion program initiated in many countries of Europe would not be carried out. Thus it has been estimated that the petroleum consumption of the participating countries, including western Germany, during the 44-year recovery period, will amount to 227,000,000 tons as compared with the CEEC estimate of about 300,000,000 tons.5 (See table 1.) Fuel-oil requirements were reduced by 45,000,000 tons or approximately 30 percent.

For the period, fiscal 1948-49, the executive branch estimates the petroleum needs of the participating countries at 48.4 million tons. This compares with the CEEC estimate for 1948 of 59.5 million tons. The average annual increase in the executive branch estimate of requirements during the three following years amounts to 7.8 percent, as compared with an average annual increase of 8.9 percent in the CEEC estimate. (See tables 1 and 2.) By fiscal 1952 the petroleum consumption of the participating countries will show an increase over 1938 of 67 percent compared with an expansion in requirements of nearly 100 percent in the rest of the world.

The restrictions on petroleum consumption assumed in the executive branch's estimate of requirements will not critically impair Europe's recovery. In the total energy balance of Europe, oil plays a much less prominent role than it does in that of the United States. By 1951, European energy supply on a per capita basis, expressed in hard coal equivalent, will be 2.52 tons of which oil will comprise 0.29 ton. In the United States during that year, total energy requirements on a comparable basis will amount to 8.09 tons, of which oil will account for 3.10 tons. The level of energy consumption in the participating countries and of petroleum consumption in particular, as measured against United States energy consumption, is modest. (See table 5.)

C. World petroleum availabilities

It is believed that the quantities of crude oil and petroleum products necessary to satisfy the requirements of the participating countries, as estimated by the executive branch should, in general, be available, provided that the projects for the expansion of the world's oil production and refining, especially in the Eastern Hemisphere, are completed on schedule. Oil transportation and distribution capacity must also be increased commensurate with the schedule rise of production. (See table 6.)

On a product-by-product basis it will still be difficult, if not impossible, to supply all the needs of an expanding world oil economy, especially in the case of heavy oil. However, any cuts that must be applied to bring consumption into

The petroleum estimates of the executive branch presented in this statement have been revised recently in order to take account of the latest information on world petroleum availabilities.

line with requirements, if distributed equitably on a world-wide basis, would not seriously reduce the quantities available for Europe below the levels estimated by the executive branch. European total requirements comprise only 12–14 percent of the total world oil demand.

While in 1946 the Western Hemisphere supplied 77 percent of Europe's petroleum imports and the Middle East 23 percent, it is estimated that in 1951 Europe will satisfy over 80 percent of its oil needs from the Middle East and less than 20 percent from the Western Hemisphere. (See table 9.)

Should petroleum supplies from the Middle East not be forthcoming in the amounts anticipated, the entire petroleum situation would, of course, have to be reexamined.

D. Role of the United States

During the period of the European recovery program the United States will be a net importer of oil and will depend for an increasing part of its requirements on sources outside the United States. (See table 10.) By 1951 the United States will probably be the largest oil-importing country of the world, importing for its domestic needs nearly as much as the three largest European oil-importing countries-the United Kingdom, France, and Italy combined-or about 60 percent of the total imports of all participating countries and their dependent overseas territories during that year. The anticipated increase in requirements in the United States between 1947 and 1951 alone will amount to about three-quarters of the total consumption of the participating countries and their dependent overseas territories in fiscal 1952 as estimated by the executive branch. (See table 8.)

It is estimated that United States exports to the participating countries in 1951 will account for about 4 percent of their import requirements as compared with 30 percent in 1938, 26 percent in 1946 and 11 percent in 1948. In absolute quantities, it is estimated that United States exports to the participating countries will decline from the 1938 level of 77,000,000 barrels and the 1946 level of 59,000, 000 barrels to 35,000,000 barrels in 1948 and 15,000,000 barrels in 1951. (See tables 9 and 11.) A sizable proportion of United States exports will consist of specialty products, such as lubricating oils. Very little, if any, fuel oil will be exported. On the other hand, the United States will import large quantities of fuel oil. In percent of United States production, shipments to participating countries will account for 1.8 percent of United States crude oil output in 1948 and for 0.8 percent in 1951 as 6.4 percent in 1938 and 3.4 percent in 1946.

The executive branch estimates that over the 4 year period, fiscal 1949 to fiscal 1952, the participating countries will need 94.5 million tons of petroleum and petroleum products from dollar sources, and 118.3 million tons from nondollar sources. This compares with an original CEEC estimate of 118.7 million tons of dollar oil and 154.9 million tons of nondollar oil. (See table 19.)

On the basis of July 1, 1947, f. o. b. United States Gulf port prices the value of dollar-oil imports during the 4-year period amounts to $1,900,000,000 and that of nondollar oil imports amounts to $2,300,000,000. This compares with an original CEEC estimate of $2,500,000,000 needed for dollar oil imports and of $2,900,000,000 needed for nondollar oil imports. The share of dollar oil in total imports as estimated by the executive branch will decline from 45.7 percent in fiscal 1949 to 42.3 percent in fiscal 1952 by quantity and from 48.3 percent in fiscal 1949 to 41.6 percent in fiscal 1952 by value. (See table 21.)

During the first 15-month period. April 1, 1948, to June 30, 1949, the quantities of dollar oil imports have been estimated by the executive branch at 27.1 million tons and those of nondollar oil at 32.2 million tons. On the basis of July 1, 1947 prices the value of these dollar-oil imports amounts to $599,000,000 7 and that of nondollar oil imports to $641,000,000.

The term "dollar oil" refers to oil marketed by American companies in participating countries wherever it might have been produced and is not limited to oil supplied by American companies from the United States. As a matter of fact oil shipped from the United States will account for an estimated 25 percent of the dollar oil import requirements of the participating countries in fiscal 1949 declining to 8 percent by fiscal

1952.

7 This estimate compares with a figure of $652,000,000 for dollar-oil imports for the 15-month period in the preliminary estimate of October 1947, which was used in the executive branch country reports. The downward revision is due to the fact that more detailed information has now been obtained on the petroleum requirements by products and uses of the different countries and on the likely availability of petroleum products during the recovery period. It should, however, be pointed out that on the basis of world oil prices quoted as of December 31, 1947, the value of the dollar-oil imports of the participating countries estimated in this report would still be nearly 18 percent higher than the value of the dollar oil imports shown in the first preliminary executive branch report on the CEEC petroleum requirements referred to above. The over-all allowance of 7.5 percent for the difference in commodity prices between July 1, 1947, and the average for fiscal 1949 is thus inadequate to cover the recent price increases in the case of oil.